As a fulltime Florida resident, I am surrounded by retirees as well as empty nesters! Many of them are very responsible when it comes to money management as their circumstances change, but I can say that for everyone.
In fact, some empty nesters in particular overlook their new financial situation, and make several mistakes that end up costing them thousands of dollars over the longterm.
On the other hand, taking control of your finances and understanding how changing circumstances can affect your wallet means saving more money over time. With that in mind, check out 7 common mistakes made by empty nesters and retirees so you can avoid these in your own family.
1. Not Reevaluating and Reworking the Family Budget
When children leave the home, parents typically spend less on groceries, utilities, and other household expenses. They might also stop paying for sports dues and equipment, school supplies, and the like.
However, too many empty nesters don’t reevaluate their new budget and consider reworking their finances in a way that works for them. For example, an empty nester might reallocate some funds they once used to support their children into a high-yield savings account. They might also have more money to invest or sink into a 401(k). Without proactively reevaluating and reworking their budget, these funds might simply remain stagnant and do nothing to enhance your financial portfolio.
2. Overindulging on Themselves
Once the kids are gone, it’s often tempting to start traveling, spending on hobbies, or otherwise overindulging. These impulsive buys can spell financial ruin for empty nesters!
Rather than give in to your urge to buy that fancy sportscar or take that luxury vacation, be patient. Review your finances carefully. A few “treats” are certainly acceptable and even well-earned, but should be purchased only after that careful consideration.
3. Not Considering a New Tax Situation
Most parents claim their dependent children on their tax returns, meaning they get a credit toward their overall tax bill. However, once those children reach a certain age, begin working themselves, or leave home, parents might not be eligible for that credit.
Too many empty nesters fail to prepare for this change to their tax situation, and are faced with a smaller return or larger bill. Whatever the case, it’s best to remember this change in your tax situation before it’s time to file! Check with an accountant about your situation or otherwise be prepared to lose that deduction so you aren’t faced with any unpleasant surprises during tax season.
4. Still Supporting Adult Children
Every family’s situation is different, and a parent paying some of their adult child’s expenses is not always something to reconsider. Having the safety net of a parent to call on during a job loss or other unexpected financial hardships can also strengthen family bonds.
On the other hand, empty nesters and retirees might reconsider supporting their adult children when it becomes financially draining for them. This is especially true if you start tapping into retirement funds, your home’s equity, and other assets meant to ensure your long-term financial stability.
5. Waiting Too Long to Downsize
Letting go of the family home is often a tough decision for empty nesters. After all, your home is tied to memories of your children growing up and all those years before they left the nest!
At the same time, homes need maintenance and repairs and also come with hefty tax bills. The larger the home, the more costly those expenses. Timely downsizing to a condo or apartment, or at least a smaller home with lower maintenance costs can mean saving thousands if not tens of thousands of dollars every year.
6. Pouring Too Much Into Home Renovations
Along with refusing to downsize, many empty nesters and retirees make the mistake of pouring too much financially into home renovations. Now that the kids are gone, it’s easy to start seeing their bedrooms as that long-desired “man cave,” or spending the money you’re otherwise saving on a new kitchen or bathroom renovation.
Nearly 3 out of 4 empty nesters renovate their homes, according to Apartment Therapy.
While spending money on home renovations can ensure a space that works better for your new situation, putting too much money into those changes can mean taking money away from retirement funds or emergency savings. Also, you aren’t likely to recoup those expenses if and when you decide to relocate.
7. Not Thinking Long-Term
Many individuals fail to think long-term when spending and saving. However, empty nesters are not only not an exception to this, but they have a unique opportunity to consider their overall goals.
For example, if you haven’t been contributing to your retirement account because you’ve been busy paying your child’s college fund, now is the time to adjust. Money you’re no longer spending on your children at home can work for you, to grow your retirement accounts; that is, if you make a plan on how to grow those funds.
Hopefully outlining these 7 common mistakes made by retirees and empty nesters can help you avoid these same issues. As always, it’s recommended that you speak to a financial advisor, accountant, or other investment specialist when making your financial decisions. This will ensure you make the best decisions for yourself and your family.
Inna Ellison is a freelance writer from Tampa, Florida, specializing in SEO content and blogs for contractors, construction companies, and more. Inna is proud to create all her material individually, without AI and other digital help.
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Inna Ellison 